Visa Jumps From Payment Rails To A Ride On The Red Hot NFT Train

At first glance, the brave new world of nonfungible tokens (NFTs) may look more like an experimental playground for collectors than a new avenue for high-tech digital commerce.

Price is what you pay, after all, and value is what you get — and the prospect of owning something that is singular (and can have only one owner at a time) has spurred some eye-popping price tags.

You might have some experience with collectibles yourself, with baseball cards or comics or Beanie Babies tucked away somewhere in the house.

But NFTs seem like collectibles on steroids. Earlier this year, in but one example, a digital collage called “Everydays: The First 5000 Days” by an artist known as “Beeple” fetched nearly $70 million.

Read more: The ‘Next Chapter’ In Art History? Digital-Only Work Sells For Close To $70 Million

But as Visa Vice President and Head of Crypto Cuy Sheffield told Karen Webster, using NFTs to buy, sell and own digital goods will pave the way for new ways of collecting, yes — and conducting commerce across social media, retail and entertainment channels.

The unique tokens (the NFTs), he said, provide a way to make sure that what we buy is authentic, that ownership is uncontestable, and that scarcity value (for those one-of-a-kind offerings) is indeed appropriately assigned.

Visa, he noted, has long been a collector of artifacts — think back to paper credit cards (yes, really) and knuckle-busters (those card imprint readers of yesteryear).

And on Monday (Aug. 23), in an example of putting one’s money where one’s mouth is, the payments network announced that it had bought CryptoPunk 7610, a pixel art image — in this case, a young woman with a mohawk.

With that deal, Visa became the first global brand to start an NFT collection.

“It’s easier and more convenient to interact with digital collectibles than physical ones,” Sheffield said.

The punks, as they might be called informally, are part of the digital art market, and there are 10,000 of them. Sheffield said the firm paid $150,000 for the NFT in a transaction that he described as one where “culture meets commerce.”

It’s a deal that Sheffield said will help the company learn, firsthand, what’s needed to successfully buy, store and eventually sell an NFT; that level of firsthand knowledge will in turn help Visa help its client partners conduct those activities. In addition, he said the transaction represents a commitment to Visa’s key role as a commerce enabler — bringing smaller firms toward new, online, digital opportunities as they produce digital goods.

In other words, the age of Beanie Babies moldering in attics is over.

$1 Billion in One Month

The signs of NFTs gaining mainstream traction are showing up in the data — chiefly in the payments volume. Sheffield recounted that just this month (which is of course not over), $1 billion has been spent on NFTs, compared to $100 million spent in all of last year.

Drilling down into the CryptoPunk acquisition itself, he said Visa paid for the digital art with the crypto known as Ether through its custodian Anchorage (49.5 Ether, to be exact). The actual transaction was completed using dollars. Sheffield told Webster that the momentum of the market itself is evident in the fact that the cheapest CryptoPunk, immediately post the Visa buy, stood at $155,000.

“We got a pretty good deal for our $150,000,” he said.

But quick profit notwithstanding, Visa’s intent is not to sell or trade that NFT.

“We added the CryptoPunk to our collection of artifacts as a way to chart and celebrate the past, present and future of commerce,” he said. “We plan to continue adding additional NFTs into our collection and want to support many different artists and creators in the space.”

But Visa seeks to learn by doing, and Sheffield noted that there has been “significant interest” from merchants, brands and content platforms seeking to participate in NFT commerce — but knowing where to start can be daunting. Those stakeholders will eventually build out NFT ecosystems featuring digital goods at lower price points (such as album covers, for example, or digital sports cards). Just collecting and displaying ownership of an item is giving rise to online communities where NFTS are the “gates” and digital wallets are “galleries” complete with virtual reality (VR) “displays.”

But Sheffield said new use cases will use NFTs tied to tickets to physical events and other use cases (Sheffield detailed other use cases and his thoughts on the NFT market in a Visa blog post that debuted Monday).

The global communities that take shape will make it possible for one’s crypto address to be as important as their mailing address, he said.

Underpinning it all is the blockchain and new user interfaces — with smart contracts guaranteeing authenticity — that allow developers to come in and build products and experiences tied to NFTs. That will open the door for merchants and brands to experiment and leverage NFTs in ways yet to be discovered, in a parallel that mirrors the rise of eCommerce itself through the past few decades.

“NFTs can give individual creators or small businesses the opportunity to harness a blockchain and produce digital goods, which can then be delivered instantly to a crypto wallet,” he said.

To get there means the infrastructure must be built out, and the payments acceptance needs to be broadened (the infrastructure is complex, and buyers and sellers need private cryptographic keys).

We’re at least partway there, as Sheffield noted that there are online tools available that make it relatively easy to mint an NFT and sell it on an online marketplace (Sheffield himself has minted an NFT of his dog).

Looking ahead, as NFTs increasingly become a tool for commerce, there will be waves of mass experimentation.

“There will be some incredible successes, and there will be some failures,” he told Webster, adding that “buying an NFT should be as easy as buying anything else online … and with NFTs, there [are] things you could not do before that you can do now in terms of being able to truly own a piece of digital media online and be able to access the community because of that ownership.”